Alastair Graham 22 January 2018

Prepaid cards: Delivering dividends for councils

Prepaid cards: Delivering dividends for councils image

Governments across the world have switched to prepaid cards as a modern alternative to cash when it comes to distributing payments to its citizens who opt not to use bank transfers. However, the UK is only now starting to fully seize the opportunity.

Cash-based government payments are inconvenient and expensive to administer, as well as being less secure and harder to track. Despite the UK being second only to Italy in Europe in its need to replace cash, with an estimated £3bn of transfers each year, it is only now that these types of prepaid schemes are being adopted.

Early efforts to modernise government payments in the UK were met with political resistance rather than practical issues, with controversial views from some about how they might be used to curtail the spending habits of benefits recipients - for example, preventing purchases deemed unnecessary or wasteful, such as buying cigarettes or on other products that are not ‘nutritionally good for you’.

This reputation fall-out from resistant comments made prepaid schemes harder to sell to the public. However, since then many programmes have been established and are thriving without the political strings attached. These have gained acceptance from the public for their ease and convenience as well as helping to streamline and lower the cost of administration for under-pressure local government departments. For example, prepaid card incentives reduce and remove the cost of printing, postage and processing for government offices.

The City of Edinburgh recently migrated more than 950 service user accounts to a prepaid card scheme, which has seen £9.5m loaded on to the cards. The cards are provided to members of the public who receive a Direct Payment to purchase services identified within their care plan, so the types of services purchased vary per person. These broadly cover care providers, individual personal assistants, respite facilities and day centres.

Many people use their card to make faster payments, as well as Direct Debits, shopping online and in stores. Although ATM withdrawals are currently not allowed.

However, the move towards prepaid isn’t solely to bring costs down and increase security. The wider goal of these types of schemes is to increase social inclusion and prevent people from being excluded from the modern digital economy.

People who receive government benefits in cash, who may not have access to a full current account or credit card, can often find the cost of living increased. Research shows those who are financially excluded pay a ‘Poverty Premium’ as they are unable to shop online or benefit from Direct Debit discounts. Studies by Save The Children and The University of Bristol estimate the cost of not having access to bank accounts or card facilities can cost families hundreds of pounds per year, which exacerbates poverty.

Research from The Financial Inclusion Commission estimates that two million people in the UK are financially excluded.

Prepaid cards bring people into the financial fold and can begin to alleviate the Poverty Premium, helping to remove digital exclusion and other barriers to entry of cheaper living costs.

Following successful implementation of prepaid card schemes such as the recent example in Edinburgh, more and more local authorities and housing associations are increasingly switching to similar incentives to fulfil their social care obligations.

It is conceivable that over the next ten years almost all of the UK’s £3bn cash payments could be replaced by prepaid alternatives, with the current implementation of Universal Credit being a big driver in adoption and uptake.

Alastair Graham is spokesperson for the Prepaid International Forum (PIF)

This feature first appeared in Local Government News magazine. Click here to receive your own free copy.

Highways jobs

DEPUTY DIRECTOR

City of Bradford MDC
£102K
Big and diverse, Bradford is the UK’s youngest city Bradford, West Yorkshire
Recuriter: City of Bradford MDC

Senior Financial Accountant

Essex County Council
£50001.0 - £59590 per annum
Essex County Council is one the largest and most complex local authorities in the UK, with a turnover of £2bn. We are a Council with high ambitions, a England, Essex, Chelmsford
Recuriter: Essex County Council

Financial Accountant

Essex County Council
£38001.0 - £44440 per annum
Essex County Council is one the largest and most complex local authorities in the UK, with a turnover of £2bn. We are a Council with high ambitions, a England, Essex, Chelmsford
Recuriter: Essex County Council

Senior Practitioner - Children in Care

Essex County Council
£38000.0 - £46000.0 per annum
Senior Practitioner - Children in Care - BasildonIn ECC we are "Serious about Social Work". Having recently won the Best Social Work Employer of the Y England, Essex, Basildon
Recuriter: Essex County Council

Casual Lifeguard

Chelmsford City Council
Grade 3 - £9.29 per hour
South Woodham Ferrers Leisure Centre is a large, multi-purpose complex accommodating a swimming pool, a sports hall, two further halls, Fitness Roo... Chelmsford, Essex
Recuriter: Chelmsford City Council

Local Government News

Latest issue - Local Goverrnemnt News

The June issue of Local Government News contains the full details of all the winning schemes in the 2019 Street Design Awards. From Children's Play to Pedestrian Environment, find out who has been recognised for their innovation and use of best practice.

This issue also explores how local government pension funds can hedge currency risk, how councils can best address the shortfall in school places, and an update on the number of authorities banning the use of Roundup over safety fears.

Register for your free magazine